Parties in conflict often prefer out-of-court dispute resolution. Although these agreements made outside the courtroom are appealing, they come with their slew of issues and may require a courtroom to enforce an out-of-court solution. When a deal outside the courtroom requires a court to intervene, how does that court decide whether to enforce the settlement agreement? And in the era of virtual communication and remote dispute resolution, how can a court decide when virtually made agreements are enforceable and binding on the parties?
The present case emerged out of a lumber dispute. In short, the defendants wrongfully cut down trees on the plaintiffs’ land. The plaintiffs filed a lawsuit against the numerous defendants for this wrongful timber cutting and the resulting property damage, penalties, interest, costs, and attorney fees. Some defendants also brought crossclaims against each other following the plaintiffs’ complaints.
The trial court conducted a conference where the parties discussed a potential settlement. Ultimately, the parties drafted an agreement in which one defendant, J.R. Logging, would pay the plaintiffs $20,000. In turn, the plaintiff’s claims against J.R. Logging and the other defendant, Fair Hills Farms, would be dismissed along with the crossclaims between defendants.
Following the conference, counsel for Fair Hills Farm sent an email to counsel for the plaintiffs and the other defendant on November 13, expressing agreement to the settlement proposal and requesting the settlement documents. The plaintiffs and the J.R. Logging defendants signed and completed their portions of the settlement agreement and sent the copy for Fair Hills to sign to Fair Hills’ counsel on December 14. However, after 14 days of waiting and no response from Fair Hills, the plaintiffs’ counsel reached out to Fair Hills’ counsel and expressed that the trial court would be contacted if Fair Hills did not respond. Fair Hills later communicated that they would not be signing the settlement.
The plaintiffs and J.R. Logging defendants filed a Joint Motion to Enforce Settlement Agreement in the trial court, but the court dismissed the motion because it was not clear on the record that Fair Hills agreed to the settlement. The J.R. Logging defendants appealed the ruling.
A court conducting appellate review will employ a two-part test to assess a factual finding: first, whether there is a reasonable factual basis in the record for the trial court’s finding, and second, whether the record shows that the finding is not clearly erroneous. If there is a factual basis for the trial court’s finding, the appellate court can only set aside the trial court’s finding if the finding is clearly erroneous based on the record review. Dozier v. Rhodus.
A compromise is a settlement contract between parties to resolve a dispute of some kind and consists of various concessions made by one or more parties involved. LSA-C.C. art. 3071. A compromise should be evidenced by a writing or a transcript of in-court reading to provide evidence of the agreement’s existence. LSA-C.C. art. 3072; Sullivan v. Sullivan. Such a compromise or proposed settlement is binding on a party once they have consented to the terms by signing the written agreement. Sullivan, 671 So.2d at 318. Under Louisiana Civil Code Article 2997, attorneys do not have the authority to agree to a settlement on behalf of their client unless given express permission. Without such express permission, counsel is limited to only negotiating an agreement and not binding their client to that negotiation.
Considering the applicable law, the appellate court determined that the main issue is whether the email between the attorneys constituted a written compromise as required by LSA-C.C. art. 3072, and whether Fair Hills’ counsel had the authority to agree to a settlement on behalf of his client. After reviewing the law and the record, the court concluded that the email communications between the attorneys for each party did not create a valid contractual settlement, thus not deserving of enforcement. The communication between counsel did establish consideration of a possible compromise. Still, Fair Hills’ counsel needed more explicit authority to agree to any settlement on his client’s behalf, and Fair Hills never signed the agreement themselves. Because the settlement was never officially put in writing and supported by a signing of all parties involved, no settlement can be enforced as the plaintiffs and J.R. Logging requested. The motion to enforce the settlement failed yet again.
In the age of advanced electronic communication, virtual agreements often become binding. However, the growing permissibility of electronically stored information creating binding contracts does not create additional flexibility in who can sign such an agreement. Client consent and signature requirements in these electronically-developed agreements are paramount to ensuring that clients are not unwittingly bound to deals made by their representation. Additionally, when online dispute resolution is becoming a more attractive alternative to in-person litigation, it is increasingly important to ensure that all lines of communication are clear and supported by evidence on the record to resolve these disputes when they arise.
Additional Sources: Marietta Trust & the Warren Trust v. J.R. Logging Inc.
Written by Berniard Law Firm Blog Writer: Callie Ericksen
Additional Berniard Law Firm Article on Settlement Agreements: How Does a Court Interpret the Terms of a Settlement Agreement?